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Malone Inc. has identified five potential new processes; however, the firm is constrained by its available budget and human resources. Each process is expected to
Malone Inc. has identified five potential new processes; however, the firm is constrained by its available budget and human resources. Each process is expected to generate a return (given by the net present value) but requires a fixed amount of cash and personnel. Because the resources are limited, all processes cannot be selected. Processes cannot be partially completed; thus, either the process must be undertaken completely or not at all. The data are given in the table below. If a process is selected, it generates the full value of the expected return and requires the full amount of cash and personnel shown in the table. Define Xi = 1 if process i is selected, and 0 otherwise. |
| Process 1 | Process 2 | Process 3 | Process 4 | Process 5 | Available Resources |
Expected Return (NPV) | $90,000 | $110,000 | $75,000 | $70,000 | $100,000 |
|
Cash requirements | $27,500 | $41,500 | $12,000 | $24,500 | $61,000 | $150,000 |
Personnel requirements | 5 | 3 | 2 | 5 | 3 | 12 |
Determine the expression that explains the personnel limitation. |
A) 5X1+ 3X2 + 3X5 ? 12 B) 5X1+ 3X2 + 3X5 ? 12 C) 5X1 + 3X2 + 2X3 + 5X4 + 3X5 ? 12 D) 5X1 + 3X2 + 3X3 + 5X4 + 2X5 ? 12
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